5.2) New Developments: Blockchain Flashcards
What is the problem with traditional banking system?
Traditional financial systems rely on central authorities (banks) to verify transactions and maintain trust.
What are the system limitations? (3)
- Single Point of Failure: Centralized systems are vulnerable to outages or manipulation by the central authority.
- Lack of Transparency: Users often have limited visibility into how their transactions are processed and verified.
- High Fees: Traditional financial institutions can charge high fees for processing transactions.
How does blockchain technology emerge as a potential solution to these problems? (4)
- Decentralization: No single entity controls the network. Transactions are verified and recorded by a distributed network of computers, eliminating the need for a central authority.
- Security: Cryptographic techniques ensure the integrity and immutability of data stored on the blockchain. Once a transaction is recorded, it cannot be altered or deleted.
- Transparency: All transactions are publicly viewable on the blockchain, promoting transparency and trust.
- Reduced Costs: By eliminating the need for intermediaries, blockchain has the potential to reduce transaction costs.
What is the evolution and history of blockchain? (6)
What is the Merkel tree?
The Merkle tree, a method to verify individual records, named after
computer scientist and mathematician Ralph Merkle (PhD dissertation at
Standford).
Who invented ‘digital cash’?
David Chaum PhD dissertation at the University of California, Berkeley – a
method of how to establish & maintain trust in a computer system. Later invented Digital Cash.
- Stuart Haber and W. Scott Stornetta published an article describing how
to ____________ digital documents to prevent users from backdating or
forward-dating electronic documents using Merkle Trees.
timestamp
Cynthia Dwork and Moni Naor (‘93), Adam Black (’97), Markus Jakobsson
and Ari Juels (1999) all made significant contributions to the concept of Proof of ______ (a consensus mechanism to validate transactions)
Work
What did Stefan Konst develop and what did it prove?
Stefan Konst introduced the concept of cryptographically secured chains, which helps prove the authenticity of transactions in a blockchain
What did Hal Finney invent?
- Hal Finney introduced reusable PoW, a mechanism for receiving a nonexchangeable – or non-fungible – hashcash token.
Who invented Cyryptocurrency?
Satoshi Nakamoto, believed to be a pseudonym used by an
individual, or perhaps a group of individuals, published a
white paper in 2008 introducing the concept of cryptocurrency and blockchain and helped develop the first Bitcoin software
What are some facts about bitcoin and Nakamoto? (5)
- Bitcoin was worth less than a penny then. Nakamoto mined
the first Bitcoin block (containing 50 bitcoin), validating the
blockchain concept. - The first Bitcoin transaction took place when Nakamoto
sent Hal Finney 10 bitcoin in block 170 in 2009. - Nakamoto set up a system to ensure the number of bitcoin
mined won’t ever exceed 21 million - On May 22 of 2010, Bitcoin made history when a
programmer Laszlo Hanyecz paid 10,000 bitcoin for two delivered Papa John’s pizzas. The two pizzas back then
were valued at about $40, a transaction that would balloon
to a value of more than $260 million+ at today’s bitcoin
price level. - Satoshi Nakamoto disappeared around 2011. Even today,
no one knows who OR what Satoshi Nakamoto is!!
What is the crux of blockchain? (2)
- Blockchain is a method of recording information that makes it impossible or difficult for the system to
be changed, hacked, or manipulated - A blockchain is a decentralized and distributed ledger that duplicates and distributes transactions
across the network of computers participating in the blockchain.
What is a ‘digital ledger’?
It is a structure, or a block of chains, that stores transactional records, also known as “the block”, of the
public in several databases, known as the “chain,” in a network connected through peer-to-peer nodes.
Typically, this storage is referred to as a ‘digital ledger.’
What are the key functions or features of blockchain technology? (4)
- It uses a digital signature feature to conduct fraud-free transactions making it impossible to corrupt or
change the data of an individual by the other users without a specific digital signature (Highly Secure). - Blockchain transactions are done with the mutual consensus of users resulting in smoother, safer, and
faster transactions (Decentralized). - Blockchains are programmable and can generate systematic actions, events, and payments automatically when the criteria of the trigger are met (Dynamic and allows Automation)
- Once a piece of information is recorded on a blockchain, it becomes permanent and cannot be deleted or modified. This immutability is a core feature of blockchain technology and contributes to its security
and reliability
What does it mean that bitcoin is decentralized network infastructure? (4)
- In the traditional financial system, a
central authority (like a bank) controls
everything e.g. approving transactions, managing accounts, and
dictating monetary policy. - Bitcoin flips this model on its head. It
is a decentralized system, meaning there is no single entity in control. - To achieve decentralization, Bitcoin
relies on a distributed network of
computers around the world called
nodes. - The distributed network infrastructure
provides the physical foundation for
Bitcoin’s decentralized operation. It
allows for geographically dispersed
nodes to work together and maintain
a secure and tamper-proof ledger system without a central authority.
What are the differences bvetween cryptocurreny and real money? (6)
What is the design and structure of blockchains? (3)
Block n-1
Block n
Block n+1
What is a node?
Nodes are network participants and their devices permit them to keep track of the distributed ledger and serve as communication hubs in various network tasks. A block broadcasts all the network nodes when a miner looks to add a new block in transactions to the blockchain.
What are transactions?
A transaction refers to a contract or agreement and transfers of assets between parties. The asset is typically cash or property. The network of computers in blockchain stores the transactional data as copy with the storage typically referred to
as a digital ledger.
What is a block?
A block in a blockchain network is similar to a link in a chain. In the field of cryptocurrency, blocks are like records that store transactions like a record book, and those are encrypted into a hash tree. There are a huge number of transactions occurring every day in the world. It is important for the users to keep track of those transactions, and they do it with the help of a block structure. The block structure of the blockchain is mentioned in the very first diagram in this article.
What is a chain?
Chain is the concept where all the blocks are connected with the help of a chain in the whole blockchain structure in the world. And those blocks are connected with the help of the previous block hash and it indicates a chaining structure.
Who are blockchain minners?
Blockchain mining is a process that validates every step in the transactions while operating all cryptocurrencies. People involved in this mining they called miners. Blockchain mining is a process to validate each step in the transactions while operating cryptocurrencies.
What is the consensus?
A consensus is a fault-tolerant mechanism that is used in computer and blockchain systems to achieve the necessary agreement on a single state of the network among distributed processes or multi-agent systems, such as with cryptocurrencies. It is useful in record keeping and other things.
